Yes, you can very well own a company in India (partly or even wholly) or set up your own company in India. Setting up or owning a company in India can broadly be achieved with the following options:

Buying shares in an existing business

Starting a new company (please see Point No. 3 below)

The above option to buying shares in an existing company or starting up a new one is same for Foreign National, Foreign Resident, Non Resident Indian`s (NRI), Person of Indian Origin (PIO), Overseas Citizen of India (OCI) [termed as ‘foreign investor’]

2. What are prerequisites to buy shares in an existing business?

In case of a closely held company (Private Limited, Limited Liability Partnership) procedures of valuation of shares, documentation of shares transfer and reporting to Reserve Bank of India need to be carried out.

Shares held by resident Indian can be purchased at a value not less than the value arrived based on guidelines issued by Reserve Bank of India (Please follow the link https://www.rbi.org.in/Scripts/FAQView.aspx?Id=26 to get more information). Resident shareholders need to comply with the requirement of ‘transfer of shares from resident to Non-Resident’, as prescribed by RBI.

2 or more parties can jointly hold the share capital-Joint Venture -JV

Representative Office only

For executing a time bound project

Representative office of Head Office

Limited Liability Partnership Firm.

Minimum Number of Directors

2 Directors, 1 to be resident in India

1 Representative

1 Representative

1 Representative

2 Partners

Minimum Number of Investors

2

N.A.

N.A.

N.A.

2

Minimum Share Capital

Authorized Capital: Rs. 100,000

Paid-up Capital: No Minimum requirement

N.A.

N.A.

N.A.

NIL

Legal Permission

Automatic Route/Approval by individual Government Departments

Advance approval from RBI

Advance approval from RBI

Advance approval from RBI

Advance approval from RBI

Corporate Liability

Limited to the subscribed share capital

Full liability of parent

Full liability of parent

Full liability of parent

Partners liability up to agreed contribution

Tax Structure

Taxed as Domestic Company @30% plus surcharge

Not Applicable, as there is no revenue/profit

Taxed as Foreign Company @40% plus surcharge

Taxed as Foreign Company @40% plus surcharge

Tax based on highest marginal rate of partners

*Starting as a Proprietorship, local Partnership, One Person Company (OPC) is not permitted

*The above discussed business format does not apply in case the objective is ‘Not for Profit’. For Example Trusts, Societies, Educational Setups etc

4. What is the owner of company called in India?

Shareholders are owner of the company and enjoy rights based on their shareholding percentage. ‘Director is a legal position who takes care of operational activities and also represents to various legal authorities governing the business.

In order to become a Director it is not required ‘to become a Shareholder. A shareholder however can also be a Director. You can also be appointed as a Director in an Indian company wherein you are not a shareholder/owner.

Generally, owner/shareholders of business retain the position of Director as well to take important decision of the business. One can however also appoint any other person to work as a Director on their behalf.

5. Do I need an Accountant or Consultant to start my business (buying shares or starting own company) in India?

Yes, apparently, you cannot do it yourself. You must hire an accountant or consultant to take care of entire process of setting up of your business.

Complete process of registering a company in India is online and one need to prepare documents, fill form and upload everything at website of Registrar of Companies (http://www.mca.gov.in/mcafoportal/login.do). Such forms also need to be verified by a Chartered Accountant (CA)/Company Secretary (CS) before being uploaded online.

6. What are prerequisite to become Director in an Indian Company?

The process starts from getting a Director Identification Number (DIN) in India. In order to obtain DIN, the person must prepare his/her Digital Signature (DSC).

In order to prepare DSC and DIN, one needs to arrange Appostile or Legalised Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form and few Photographs.

7. What are prerequisite to become a Shareholder in an Indian Company?

None of typical registrations (Tax, DIN etc) are required to become a shareholder in an Indian company. You need to however prepare a DSC (New Process of Company Registration at MCA) and you need to arrange Appostile or Legalised Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form etc and few Photographs.

8. What exactly I need to do to arrange the documents for being a Director?

(a) Steps to arrange for DSC

Get an accountant/consultant (CA, CS, Lawyer, Business Consultant), who will help you in entire process in preparing government forms, uploading on portals and if required following it up.

Get your Identity Proof (Passport), Address Proof (Bank Statement, Countries Identity Card etc), DSC Form and few Photographs, Appostile/Legalised in your home country

Post the documents in Original to your Indian Consultant, who will arrange to get a DSC on your behalf, which is generally valid for a period of 2 years. Give a written authorization to the consultant to affix the DSC only on your approval

(b) Steps to arrange DIN

Your consultant can fill out form of DIN at Registrar of Companies (ROC) portal, get the same verified and approved from you and upload the same.

The DIN issued by ROC is a 8 digit number, which is valid for the life time. DIN is a permanent number for being appointed as a Director.

9. Are there any other formalities to be fulfilled to become a Director in Indian Company?

For Indian passport holder there is a formality to obtain a Permanent Account Number (PAN) from Income Tax Authorities. A Foreign National, Foreign

10. Do I need to be present in India in during the process of setting up my business?

It is not necessary to be present in India for being appointed as a director or a shareholder. Similarly, the entire process of business registration can be done online and there is no requirement to travel to India or be present physically at any stage.

In case you are travelling India on a business visa, you can sign all the documents during your India visit. Such documents would not be required to be appostile or legalised in your home country.

In other case, one can arrange to post the stated documents (duly signed, appostiled, legalised), to their hired accountant, consultant in India, who can handle the entire process of obtaining DIN, DSC and coordinate in filing the required form at Registrar of Companies.

11. Is there any local partner (Indian Resident) required by Indian Law?

Companies Act 2013 brought a new provision wherein there must be at least 1 Resident Director in Board of an Indian Company. Resident director is defined as a citizen of India which has resided at least 180 days in a calendar year.

Responsibilities of the resident director are primarily to coordinate with the local government authorities, as and when there is any requirement. He may or may not be involved business decisions or even operational matters. From legal side, there is no predefined remuneration for such director.

12. Can I own 100% equity in Indian business (existing or new)?

Companies Act 2013 allows a Foreign National, Foreign Resident, Non Resident Indian`s (NRI), Person of Indian Origin (PIO) or their business entities overseas to own 100% equity in their business set up in India.

13. Can I open a Single person/ One person company (OPC) in India?

NRI`, PIO`s, Foreign Nationals are not eligible to form a OPC in India. Companies Act 2013 allowed a new concept to form a single person company called ‘’One Person Company (OPC)’, however its only allowed for a Resident Indian.

14. Is there any minimum capital requirement to start a business in India?

There is no minimum required share capital. Recently, the Companies Act 2013 removed the minimum authorized share capital limit (INR 100K for a Private Limited Company, INR 500K for a Public Limited Company)

15. Is there any restriction in starting a Partnership Firm, Limited Liability Partnership (LLP) or buy shares therein?

You can do the same, if the following conditions are met:

Indian Partnership Firm should not be engaged in agricultural, plantation, real estate, media businesses (restricted sectors)

Amount can only be invested by way of inward remittance or out of NRE, FCNR or NRO accounts maintained with authorized Banks

16. What are sources to fund my newly acquired/setup business in India?

In an event where revenue of Indian entity is below Break Even Point (BEP), the initial Capex (Capital Expenses) & Opex (Operational Expenses) requirement can be met through Share Capital (Investment) funded from the shareholders.

External Commercial Borrowings (ECB) is allowed for Capital Expenditures. In current scenario, ECBs are also allowed for Working Capital Expenditure; however certain conditions are imposed by Reserve bank of India (RBI) need to be followed. Please click on the link for more information https://rbi.org.in/SCRIPTs/BS_ViewMasCirculardetails.aspx?id=9840

17. What are further formalities for making the business operational?

Once the legal structure of business (Private Limited Company, Limited Liability Company, Limited Liability Partnership etc) is registered, following activities need to be completed:

Registration under Value Added Tax: State laws require a registration for trading in Goods

Registration of Service Tax: Register for doing trade in Services

Register under Shops & Establishment: Location based registration in few states

Registration under Professional Tax: Location based registration in few states

​Appendix:

Foreign National: A person who is not a naturalized citizen of the country in which he is residing or citizen of a country other than India.

Foreign Resident: Resident of a foreign country. Generally the term is used for a foreign national.

Non Resident Indian: Citizens of India, holding Indian Passport, immigrated to any other country for six months or more.

Person of Indian Origin (PIO): Not a citizen of India but a person of Indian origin or ancestry. As per Gazette of India (Part-I, Section-I) published on 09.01.2015, all the existing Persons of Indian Origin (PIO) card holder registered as such under new PIO Card scheme 2002, shall be deemed to be Overseas Citizens of India Cardholder (http://boi.gov.in/content/person-indian-origin-pio)

Overseas Citizen of India: Person of Indian Origin (PIO), who was citizen of India on Jan 26, 1950 or thereafter, residing overseas, can register them as Overseas Citizen of India (OCI). OCI`s are entitled to general 'parity with Non-Resident Indians.

Note: Definition of above terms need to be checked from respective section of Foreign Exchange Management Act (FEMA) in specific cases such as acquisition of shares, acquisition of immovable properties, purchasing of Jewelry & bullions etc. This document only covers, these terms with respect to buying shares in an existing business or starting a new company in India.

About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.Contact: ca.shashi@rakchamps.com or +91 9818700482Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com

Comments

Hello Rameshwar
Sorry for late reply
We wish to clarify that in order to become a Director in Indian company, you do not require any US Passport or document. You can apply for your directorship by using local credential and documents.
Hope it clarifies
Should you require further information, do write us at shashi.m@excelorindia.com

Sir,
You can apply for Director Identification Number as Citizen of US but resident in India and produce your documents e.g Indian PAN Card, Passport etc. As you are residing in India, a simple notarization in India will serve the purpose. Hope it clarifies